BPO Vendors

11/01/2021 0 By indiafreenotes
  1. Traditional IT services/IT Outsourcing companies:

 These are big companies that already have a good track record of services in traditional IT areas. They have started offering BPO services to leverage their expertise and the client relationships that are already in existence. In India, large IT services companies like Infosys, WIPRO, Tata Consultancy, Satyam etc. have started offering BPO services either directly or through their subsidiaries.

  1. Consulting firms:

Consulting firms have the distinct advantage of working with several companies and are hence exposed to the best practices followed worldwide. Their domain knowledge gives them tremendous competitive advantage as also the CEO level relationships that they have built over the years. Hewitt, Accenture and Ernst & Young are some of the consulting firms in this category.

  1. Pure play BPO vendors:

These companies have been set up exclusively for undertaking BPO contracts. Such companies have mushroomed in the past couple of years, especially relatively lower and Transaction BPO providers and Niche providers. This growth is especially in the areas of transcription, call centres, e-accounts etc.

Criteria for selecting an outsourcing vendor

In an outsourcing deal, buyers want to achieve superior quality service at lower cost and minimum involvement. On the other hand, outsourcing the work to an external agency exposes the customer to risks of the work being delivered poorly. In such a scenario, selection of a vendor for outsourcing is a difficult task, which becomes even more complex while selecting an offshore vendor. Customers generally follow the criteria mentioned below for selecting an outsourcing supplier:

  1. Cost savings.

 The lowering of the overall cost of the service to the business. This will involve reducing the scope, defining quality levels, re-pricing, re-negotiation, cost re-structuring. Access to lower cost economies through offshoring called “labor arbitrage” generated by the wage gap between industrialized and developing nations.

  1. Focus on Core Business.

Resources (for example investment, people, infrastructure) are focused on developing the core business. For example, often organizations outsource their IT support to specialised IT services companies.

  1. Cost restructuring.

Operating leverage is a measure that compares fixed costs to variable costs. Outsourcing changes the balance of this ratio by offering a move from fixed to variable cost and also by making variable costs more predictable.

  1. Improve quality.

Achieve a step change in quality through contracting out the service with a new service level agreement.

  1. Knowledge

Access to intellectual property and wider experience and knowledge.

  1. Contract

Services will be provided to a legally binding contract with financial penalties and legal redress. This is not the case with internal services.

  1. Operational expertise

Access to operational best practice that would be too difficult or time consuming to develop in-house.

  1. Access to talent

Access to a larger talent pool and a sustainable source of skills, in particular in science and engineering.

  1. Capacity management

An improved method of capacity management of services and technology where the risk in providing the excess capacity is borne by the supplier.

  1. Catalyst for change

An organization can use an outsourcing agreement as a catalyst for major step change that cannot be achieved alone. The outsourcer becomes a Change agent in the process.

  1. Enhance capacity for innovation

Companies increasingly use external knowledge service providers to supplement limited in-house capacity for product innovation.

  1. Reduce time to market

The acceleration of the development or production of a product through the additional capability brought by the supplier.

  1. Commodification

The trend of standardizing business processes, IT Services, and application services which enable to buy at the right price, allows businesses access to services which were only available to large corporations.

  1. Risk management

An approach to risk management for some types of risks is to partner with an outsourcer who is better able to provide the mitigation.

  1. Venture Capital

Some countries match government funds venture capital with private venture capital for startups that start businesses in their country.

  1. Tax Benefit

Countries offer tax incentives to move manufacturing operations to counter high corporate taxes within another country.

Challenges for the BPO Vendor

All the different kinds of BPO vendors described above face various challenges:

Long-term contracts:

BPO contracts (as against IT services outsourcing contracts) are long-term which requires vendors to invest up-front in technology, people and infrastructure. Most BPO rampups require customized solutions to back the re-engineered processes.

People and HR issues:

Attrition, poaching of experienced people by competitors, leave of absence, stress, long training periods and the big investments associated with training are some of the serious people or HR related challenges that BPO vendors face day in day out.

Fast scaling-up needs:

A BPO vendor should be able to grow with the client. Large BPO contracts are usually bagged only by big BPO vendors as the client has the confidence in their ability to deliver and manage the critical, yet non-core, process across different geographical areas, time zones, languages and situations.

Quality turnaround time requirement:

Clients are usually extremely stringent about quality standards of the services provided by the BPO vendors and the time they take for the same.

Industry expertise:

Though the client outsources one of the several processes it performs, successful BPO vendors are expected to understand it in the light of the others that the company performs and have not been outsourced. This is essential to help the BPO vendor understand the exact requirements in the larger scheme of things. This will have a positive impact on quality and delivery time.

Long gestation period for ROI:

Large capital investments generate returns over a long term. Initially, the vendor needs to create the infrastructure to manage complex processes, invest in technology, systems and people and achieve critical mass to scale up and down with the client’s requirements. However, the initial period can be long and stretch up to two years in some cases. BPO vendors need to have patience and financial backing to carry it through such times.